Fitch upgrades Vietnamese banks’ ratings thanks to positive outlook

The State Bank of Vietnam building is seen in Hanoi, Vietnam September 8, 2017. Photo by Reuters/Kham

The global rating agency has credited major banks for higher capital levels and asset quality improvement.

Credit rating agency Fitch has recognized Vietnam’s efforts to improve economic policy and promote macroeconomic stability by rewarding its banking sector with a more positive outlook.

Fitch Ratings moved up the long-term issuer default rating of the Military Commercial Joint Stock Bank (Military Bank) to B+ from B with a stable outlook, and its viability rating to B+ from B.

The long-term default ratings of three of the country’s biggest lenders, Agribank, Vietinbank and Vietcombank were affirmed at B+ with a positive outlook, and the Asia Commercial Joint Stock Bank (ACB) at B with a stable outlook.

The viability ratings of Vietcombank and Vietinbank were upgraded from to B- to B, Fitch said in an online statement.

The banks were upgraded thanks to higher capital levels and asset quality improvement, which is reflected via diversified loan composition and declining rate of bad debt, it said.

Bad debt in Vietnam’s banking sector, mostly incurred due to a slowdown in the country’s real estate market in the early 2010s, was estimated at 9.5 percent last year, said the National Financial Supervisory Commission. Credit expanded by an estimated 16.96 percent, according to the General Statistics Office.

Credit ratings agency Moody’s last October upgraded its outlook for Vietnam’s banking system from stable to positive for the next 12-18 months, reflecting the country’s strong economic prospects.

The government expects the economy to expand 6.5-6.7 percent this year, following 10-year record growth of 6.81 percent in 2017.